How Web Giants & Startups Target Local Ads

As the fast-growing business of local online media continues to take shape, one of the biggest landgrabs is providing advertising and marketing services for small businesses.

A host of players - from biggest search and social giants to transformed Yellow Page companies, from social commerce startups to local TV and newspapers - are all vying for a piece of the marketing budget that local retailers, contractors and restaurants are increasingly plunking down on the Web.

Internet innovators like Google and Groupon are certainly grabbing attention and early market share. But you can't count out other players either, says Peter Krasilovsky, who tracks Internet marketplaces and other emerging directional media as a vice president with BIA/Kelsey, a research firm based in Chantilly, Va.

“Most people don't realize that the average Yellow Pages company now sells more than 7 products, including a wide range of different digital products,” he said. “They're aggressive about migrating their clients to new platforms.”

The Yellow Pages may bring to mind the huge array of local products and services clamoring for attention online, but Krasilovsky says “directional media” is an even broader category.

“Directional media where people go to find things they already know they want to buy,” he said. “It's different from display and image advertising. It's yellow pages, and search, and coupons and some kinds of classifieds. It's also about deep engagement with the consumer, and it's transactional buying and selling.”

It's also big money. The average Yellow Pages advertiser spends about $5,500 on yellow pages advertising, adding up to a $10.9 billion print-directory business in the United States. Online directories nabbed an additional $1.7 billion from the local-online ad pie last year.

BIA/Kelsey pegs local online ads at $5.3 billion of $19.6 billion to be spent online this year, up from $4.4 billion last year, and projects local to grow to $10.8 billion of a $35.2 billion digital spend in 2014.

All eyes were focused on how small-businesses would spend those marketing dollars at  BIA/Kelsey's Directional Media Strategies conference in Dallas last week. In yet another sign that dollars are flowing digital, the conference attracted a record number of attendees despite the downturn in the core Yellow Pages industry.

“We’re seeing sales organizations take much more of a holistic interest in their advertisers’ results, incorporating all kinds of social media, user generated content and video into their campaigns,” said Krasilovsky.

“Everyone knows that the only thing that matters is leads and engagement.”

Internet innovators draw dollars to digital

Google's search business is a big beneficiary of directional ad dollars, and Google says about 20 percent of its web searches are related to location. On the mobile platform, that number rises to about one-third of  Google searches being local.

That’s why Google is also aiming to mine more local ad dollars, and to lead the way developing mobile and mapping services.

In June the company launched Google Tags in beta nationwide, an advertising program for local businesses. Google Tags costs $25 a month and lets business owners highlight a different aspect of their business, such as a coupon, video, message, Web site, menu, reservation or a photo in these tags that turn up in search results. Google Tags also are  designed to work on mobile phones.

“If you’re a construction worker you could show something you are working on, so this is a way for small local business owners who want a simple and easy way to advertise online,” said Deanna Yick, a Google spokesperson.

Yick said “thousands” of businesses have signed up so far. Google Tags is offered through Google Places, a mechanism for business to add their business profile information to an online database of business owners, and uses the same sales process that built a $20 billion business with Google Adwords search marketing.

Google is far from the only Internet innovator aiming to help SMBs grow their business. There's a dizzying array of new digital services, with almost daily announcements of new products, features or whole companies trying to lend a hand.  Some of this year's key trends include:

Daily deals and group-buying. Less than two years' old, Groupon has kicked off an astounding flurry of local daily-deals sites. It pioneered a win-win-win business model that has attracted hundreds of clones and variations: Simply put, consumers get great deals if enough people buy, businesses don't pay unless enough customers sign up for the deal, and the distributor typically gets a cut of sales.